How to Make Accounting Easier in Your Small Business 0
No business is ever established with the intention of failing. That’s why keeping track and staying on top of your small business’ finances is a key ingredient for expansion and growth.
According to a troubling report, 30% of small businesses crumble in their second year of launch. One of the major reasons why this happen is because attention was not properly paid to their accounting records.
As an entrepreneur looking to grow in your small business, you’ll be better prepared to navigate the uncertainties, obstacles, and future unknowns when you’re fully aware of your business finances. And we’ve got you covered on how to do so.
How to Make Accounting Easier
Launching a new business presents you with several responsibilities that need your undivided attention. However, below are some tips you can practice to make your accounting easier.
Create a concise invoicing system
One of the recommended ways to make your accounting easier and efficient is to create an organized invoicing system. As you progress in your day-to-day activity, you’d soon realize that keeping up with all your finances is tasking.
In a world where everything (including businesses) are going digital, you should opt for one of the best accounting software available to handle your invoices. What you should look out for is a software that has features that will accommodate your accounting needs. Also, you should also consider accounting software that has the potential of moving your business forward.
Create a smooth payroll system
If your small business has employees, you’d have to pay them for weekly or monthly service rendered to your business. This invariably means you’d need to have a payroll system in place.
Contrary to popular opinions, processing payroll is a complex process that you’d have to monitor closely to prevent making costly mistakes for either the workers or the business.
For instance, a lot of time is channeled into calculating a worker’s wages. You’d have to ensure that the taxes are accurately deducted and the bonuses and allowances are included.
You’d have to repeat the same action for the rest of your employees.
Time is money, and when that much time is spent taking care of something else, it might impact your business negatively.
You need to consider hiring the services of a payroll provider to handle this vital responsibility. A reputable payroll provider will handle this problem, ensuring that your business meets compliance with federal and state tax laws.
Keep track of all expense receipts
Whether your business is big or small, it is important to keep track of the receipts from your business expenses. This can be a tad difficult if you or your employee are constantly making purchases that the business needs.
To avoid cases of misplaced receipts, you should store them immediately you’ve made a business expense. Better still, you should opt for accounting software that allows you to archive business receipts efficiently and safely.
Constantly check your records
As a small business owner, now’s the time to start practicing some business habits that will protect your business in the long run. Before filing your financial records away after every month, go through everything properly to ensure that the numbers are consistent throughout.
This habit will save you and your business from future hitches and create a seamless accounting process.
Create a separate bank account for your business
Entrepreneurs often make the mistake of using their personal bank account to finance their businesses. It doesn’t matter if you’re a freelancer, it is better to finance your business expenses from a bank account created for the business.
Keeping track of the finances of your business may seem daunting at first but following these simple steps will make accounting for your business easier.
Can I Pay Myself As A Small Business Owner? 0
Everybody remembers the first time they ever got paid for a service rendered. That feeling of excitement and joy washing over you as you grab your paycheck with tight fists. Is the feeling ever the same when you pay yourself from the profits of your small business?
It sounds weird when you think about it. But as a small business owner, after a long time spent to plan and bring your business to life, it is totally okay to reap from your hard-earned labor by paying yourself.
In this article, we’ll explore how you can pay yourself from the proceeds of your business.
How to Pay Yourself from Your Own Business
If you’re a small business owner, below are the various steps you can take to pay yourself from your business.
Find out your business type
Figuring out your business type is the first step to create the basis for how you want to be paid. There are small business types available, and it is best you know how each of them operates.
- Sole proprietorship. This is typically how small businesses and startups are operated. This is a business owned by you and you alone. This typically means you have total control over your business, including your profits, expenses, and debts. You alone decide the amount of cash you can pay yourself.
- This is a business set up by 2 or more persons. All the partners in this business setup must all agree on the salaries that will be paid. The expenses, profits, and losses must also be shared amongst partners.
- Limited liability company (LLC). This is a business type that incorporates parts of a sole proprietorship, a partnership, and a corporation. In this business structure, you are not responsible for the debts or liabilities accrued in the business. The business takes care of itself including your salary.
Once, you’ve decided on the business type your business falls into, it will further indicate the payment style for you.
Figure out a payment method
After figuring out how your business is set up, the next thing to do is to find out a payment method. This can be determined in two ways:
- By owner’s draw. A small business owner typically pays himself through the owner’s draw. The IRS sees owners of small businesses, partnerships, and LLCs as self-employed. This means you’re not going to get taxed at the point of withdrawals. However, you should pay taxes when you file your individual returns.
- By salary. A small business owner's salary is meant to be taxed by the state and federal government.
Select your payment amount
The next step after determining your payment method is to ascertain how much you’re going to pay yourself. You should decide on an amount that is deserving and not over the top figure.
You need to determine the net profit of your business and ascertain your pay from it and not from the total revenue.
One good way to ascertain a reasonable amount is to figure out how much you’d likely get paid for your duties if you were working a similar role in another business.
Select a payroll schedule
With everything in place, a crucial step is deciding when to pay yourself. Typically, it could be weekly, every two weeks, or monthly. You should select a payment schedule that will suit you.
The final and most important step is to get paid for your efforts in running your small business. You can do this by depositing money from your business account to your personal account. You can also opt to write yourself a check to cash later at your bank.
Paying yourself as a business owner should be done right. These easy-to-steps will set you up just fine.